Key Takeaways

• Crocs shares plunged Tuesday as sales of its smaller Heydude brand remain a drag on earnings.

• The footwear maker's earnings posted Tuesday beat estimates for the third quarter, but the company also lowered projections for the full year.

• Sales of the Heydude brand for the full year are seen dropping 14.5% year-over-year, a much larger decline than Crocs' previously forecast 8% to 10% fall.

Shares of Crocs, Inc. (CROX) fell more than 18% Tuesday after the company's third-quarter earnings beat was overshadowed by sales weakness from its smaller Heydude brand.

The footwear company reported $1.06 billion in revenue, narrowly above estimates compiled by Visible Alpha, while profit of $199.8 million also beat estimates of $187.3 million.

Investor concerns seemed to stem from sales of Heydude shoes—a company Crocs acquired in 2022. Heydude's revenue fell short of estimates at $204 million, and the company also updated full-year projections, expecting Heydude sales to fall by a larger margin than previously reported.

Heydude Sales Continue To Drag Earnings

Chief Executive Officer (CEO) Andrew Rees said Crocs has seen positive results from its investments in new marketing for the brand, but noted that Heydude's "recent performance and the current operating environment are signaling it will take longer than we had initially planned for the brand to turn a corner."

The company said it expects fourth-quarter revenue to be roughly flat to up slightly year-over-year, as 2% growth in Crocs revenue will likely be offset by a 4% to 6% decline in Heydude sales. Analysts expected Heydude revenue in the current quarter to rise to $251.3 million from $227.6 million a year ago.

Crocs also updated its full-year revenue growth projections, expecting to come in at the low end of a previously forecast 3% to 5% range. Crocs revenue is projected at a midpoint of 8% growth, while Heydude revenue is now expected to fall 14.5% year-over-year, compared with the previous range of down 8% to 10%.

"While we are resetting our full-year outlook for HEYDUDE, I remain confident in the long-term trajectory of the brand," Rees said in a news release.

Crocs shares recently were down more than 18.5% Tuesday at $112.49.

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